tv Nightly Business Report PBS April 27, 2012 1:00am-1:30am PDT
>> susie: sales of the kindle fire are on fire, leading amazon to big quarterly profits. the king of online shopping posts results four times better than expected. >> i think that shows that amazon's got the game plan right to continue to take market share in both bricks and mortar, as well as other internet retailers. >> tom: strong earnings from a number of different industries have the bulls running on wall street again. it's "nightly business report" for thursday, april 26. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
captioning sponsored by wpbt >> susie: good evening, everyone. amazing earnings tonight from amazon. tom, profits came in way above analysts' estimates, and in after-hours trading, shares skyrocketed as much 11%. tom: susie, investors were certainly surprised. amazon earned 28 cents a share, 21 cents above estimates. revenues of $13.2 billion were also better than expected. while not to the same magnitude, better than expected earnings has been a trend this quarter. and helped stocks move higher-- the dow jumped 113, the nasdaq
added 21, the s&p up 9. >> susie: despite those stellar amazon numbers... there are still people that are skeptical amazon can keep the momentum going. darren gersh reports. >> reporter: not only did amazon outperform the rest of the internet retailing crowd last quarter, it also helped quiet critics worried about the company's heavy investment in the kindle. >> bottom line, good quarter for amazon. still a lot of choppiness in the quarters to come but, long-term, very positive about this company. >> reporter: amazon did not just have a good first quarter, it is also forecasting a strong second quarter. the company now sees net sales of up to $13 billion. that's a solid growth rate of between 20% and 34%. >> that was above what the street was looking for and our estimates, as well. i think that shows that the amazon's got the game plan right to continue to take market share in both bricks and mortar, as well as other internet retailers. >> reporter: but amazon is still an internet retailer, which means it makes a slim profit margin on huge sales.
and right now, its investing heavily in not only the kindle but also new fulfillment centers. it spent almost $5 billion upgrading its warehouses last year alone. >> i think the biggest challenge for amazon is going to be building up that net margin line to really build profitability in the operation to help justify what people still see as possibly an expensive looking stock today. >> reporter: moser owns shares in amazon, and he likes the company, in part, because it is disruptive, spending money to build new products like the kindle. but that also means shareholders need to be patient. >> amazon has been very up-front in saying that their operating revenue, their operating income and their net income is going to be taking hits here and there. >> reporter: amazon sales and profits were up strongly last quarter, but expenses rose even faster. overall operating expenses were up 36%, reflecting new investments to keep up with those growing sales. darren gersh, "nightly business report," washington. >> tom: it was a different earnings story earlier today out of exxon mobil.
the oil giant disappointed investors when it reported profits of $2 a share in the first quarter. that was nine cents below wall street forecasts and 14 cents lower than year-ago numbers. still, as suzanne pratt reports, investors need not lose sleep over the earnings miss. >> reporter: a quick look at gas prices behind me and you're probably wondering how exxon mobil could possibly disappoint investors with its latest profit report. to be clear, the world's largest oil company still earned billions of dollars in the first quarter. and exxon's c.e.o. said today, "the results reflect our ongoing focus on developing and delivering energy needed to support job creation and economic growth." analyst faisel khan said several factors, including chemicals output and higher taxes, caused the earnings shortfall, but nothing was significant. >> this is such a large diversified company that there's a lot of things that can affect earnings in any given quarter.
what we've found in covering the stock over the last four years or so is that, over time, those earnings tend to smooth out and issues tend to right themselves over time. >> reporter: as for exxon's stock, it slipped today on the earnings news, and in the last year, despite volatility, it's returned little for shareholders. still, khan rates the shares a "buy." >> target price of $100. it's based on the company's ability to be the lowest cost producer in every single asset class that they own. >> reporter: yesterday, exxon gave shareholders a nice gift, upping the company's dividend by 21%. and some analysts predict more dividend increases are coming. but when asked about that today on a conference call, company management was evasive. >> that's a good question, but i don't have a comment or wouldn't want to try to speculate or
forecast what we might do going forward. >> reporter: analysts say another increase in the dividend this year makes sense. after all, the company is still a serious cash cow, and it's good p.r. to return some the money to shareholders. suzanne pratt, "nightly business report," new york. >> susie: with all the major american airlines reporting their quarterly results, the losses aren't as bad as expected. united-continental reported today a first-quarter loss, but it was less than expected. most airlines lost money, despite higher airfares in the first quarter. joining us now, to talk about those results and that possible merger between american airlines and u.s. air, ray neidl, aerospace analyst at maxim group. >> hi. >> susie: all right so looking at the numbers you know the airlines all complained about higher jet fuel prices but then that was offset by higher demand, higher travel demand. how would you characterize how
the airlines are doing? >> the first quarter is usually the weakest quarter for the industry. i had thought the industry would make a small profit until oil prices jumped and will turn out to a small loss and coming into the second and third quarter and demand is strong. i expect to see ticket price increases and less discounting of tickets in the form of sales and as a result i think the industry's going to make good profitability in the second and third quarter and for the year they'll probably be 50% higher than last year. >> susie: okay. let's talk about ticket prices. they've been up a couple times, three times this year and there's talk about higher prices. is there a point at which consumers get priced out that they stay home because fares get too high? >> there is but we're not at it yet. demand remains strong and the only reason we don't have more ticket increases i believe is southwest product feels consumers will push back. other airlines don't feel that way.
>> susie: all right. let's talk a little bit about u.s. airways making a play to buy american airlines and american airlines resisting all of that. do you think this merger's really going to go through at some point? >> ah, yes. i don't think it will go through in the next couple of months. american does want to resist that and restructure to be in a stronger position to negotiate a merger but at the end of the day, twelve months maybe longer i'd say there's a 90% probability we have a merger with american and probably u.s. airways. >> susie: can the airlines really help each other? >> they can. they provide market mass, they're root systems are complimently and between the two they have good management. >> susie: all right. let's take a look at some of the stocks you recommend you have a lot on your buy list taking a look here we have united, delta and u.s. air as well as others. you like those but have a hold on southwest and jet blue. tell us a little bit about your thinking here.
>> i've not a sell on amr because the stock is worthless and bankruptcy and jet blue and southwest i have holds on. southwest is trying to find their way this year with their model and the other airlines i think will benefit from the strong demand this year which iss issis why i think the stocks are cheap. >> susie: any disclosures, ray? >> i do not own any. >> susie: always a pleasure. thanks so much. >> thank you. >> reporter: i'm erika miller on the lower east side. coming up, i'll tell you about a web site that's helping raise money for a one-of-a-kind project below my feet. >> tom: the job market may be showing signs of slowing, but retail spending hasn't. consumer spending is up ten months in a row, and among the places where we're spending more money-- clothing stores. edgar huber is the c.e.o. at lands' end, which is owned by
sears. >> tom: have you noticed a change in customer spending behavior this spring? >> we have a more dynamic sense the beginning of the year and we also see is this consumers buying more full-priced product as don't have to promote as much as we did at the end of last year. >> tom: it looks like something that will drop down to the bottom line. what about the sensitivity your customer has to gas prices. have you noticed anything there? >> the average income is $100,000 and they're not as dependent on gas prices. >> tom: sells like you're able to sell more full-priced items. is the competition becoming
less. >> i think our product is getting better. >> tom: let's ask about the prices coming into that. cotton has come down significantly from last year and last spring they were bemoaning prices does it promote better pricing as well? >> the raw material pricing is helping out and rere-engineered our product line. >> tom: what products are you using to move way the this volatile raw material prices. >> we moved more into wool and re-engineered the outerwear and have more high-tech polar materials which are not cotton bring. >> tom: we've had a warm spring and end of winter. has it impacted your product mix
you traditionally have? >> yes, we started selling spring and summer products earlier than last year. >> tom: any concern it may have robbed sales away from may, june and july? >> we don't see it yet and we have a very very strong swimsuit business which is getting on track now. we haven't seen a transfer of sales so far. >> tom: i have to ask about speculation that sears may sell your brand, lands end. the chairman wrote, quote, should the circumstances warrant we have the ability to access or release value through our ownership of 100% of lands end." without commenting on that speculation had out important is the independent lands end to the company. >> it's 50 years old and lands
end has a long and successful history in developing very successful products and providing the best possible customer service. that's what we are are focussing on in the tru future. >> tom: edgar huber the boss at lands end. >> susie: mixed news on the jobs picture. new claims for jobless benefits fell in the past week, but they are still near a four-month high. the number of people filing for first-time unemployment benefits fell by 1,000 to a seasonally adjusted 388,000. but last week's numbers were revised higher, a sign that american businesses are still laying off workers. still, economist heidi shierholz says the overall trend in jobless claims is headed in the right direction.
>> ultimately, what we're seeing, despite some recent up- tick in unemployment insurance claims, is a general downward trend, with volatility around that trend. there's fluctuation, but there's general improvement, even with the recent speight of upward revisions. that's still the general trend. >> susie: meanwhile, some encouraging news about housing-- an index that tracks signed contracts to buy homes rose sharply in march. pending home sales jumped more than 4%, their highest level in nearly two years. >> tom: the push to preven student college loan interest rates from doubling in july has made it to congress. the u.s. house is scheduled to vote on a measure tomorrow. the senate also has a plan in the works. but as sylvia hall reports from washington, the next battle is how to pay for it. >> reporter: meet the newest centerpiece of u.s. politics, the american college student. this summer, interest rates on stafford loans, a popular type
of federal student loan, are scheduled to shoot up from 3.4% to nearly 7%. house speaker john boehner today said congress has always planned to extend the low rates. >> the fact is that students are already struggling with the cost of college. we do not want to see these interest rates go up, and there was never any thought these interest rates would go up. >> reporter: but it doesn't end there. to pay for the lower rates, republicans want to strip money from part of the health care law that helps pay for preventative care, including mammograms. it's a political sharp edge that has democrats crying foul. >> that's not a serious attempt to pass this student loan bill. they want to make democrats choose between helping students afford college tuition or forcing women to go without mammograms. >> reporter: democratic senators have some tricks of their own. they have an alternative plan that would fund the lower student rates by hiking payroll taxes for high-wage business owners. to vote for it, many republicans would have to violate their pledge not to raise taxes. sylvia hall, "nightly business
report," washington. >> tom: we asked our facebook friends what they think about student loan debt. cody's in school now and has student loans. he says, "i just want to make sure that, in 20 years when my kids go to college, that tuition isn't four times what it is today." and joseph says raising borrowing rates is a "great way to put the hurt on young people attempting to make something of their lives." you can join the conversation. we're on facebook and twitter at b-i-z-r-p-t. >> susie: so tom it was a pretty good day for the blue chips and a bit of this and that and about about the housing numbers we
talked about. a little bit on the earning we've within reported about and still encouragement about what ben bernanke said yesterday about intervening in the market if necessary adding up to a good dayer to traders. >> tom: we saw buying interest on the backs of the economic data, despite that which was less than enthusiastic. let's look at the s&p 500 and how it looked throughout the session. despite the less than enthusiastic data on jobs, stocks moved higher. the s&p 500 saw stronger bids coming in the afternoon. it ended higher by two-thirds of a percent. today's rally takes the index to a three week high, making up a lot of the losses since the first of the month. the leading stock sectors today included telecommunications, up more than 1.5%.
consumer discretionary and financial sectors up about 1% each. it was a tale of two types of businesses among telecom. the big legacy carriers were up while a pre-paid wireless firm fell hard. at&t and verizon each saw nice rallies, up about 2%. at&t closed at a new 52-week high. but metro p.c.s., a pre-paid wireless carrier, lost more than 10% of its value. it's pay-as-you-go business saw customer growth slow as earnings came up short of expectations. in addition to amazon, which we reported earlier, the earnings focus was on starbucks after the closing bell. the growth story continues with earrings coming in one penny better than forecast. but sales at stores open for more than a year in europe were down, highlighting the drag that continent can be for global brands. the stock came into tonight's report after gaining 2% during the regular session, but then sold off about 4% in after-hours action.
while the company raised its own guidance for the year, it still came up short of what wall street was expecting, pressuring the stock. but helping lead consumer stocks today was homebuilders. the ryland group jumped 14%. pulte-group rose 10% after it lost less money than feared in the latest quarter. it also saw a big jump in orders for new homes. lennar added almost 6%. last month, it also reported a strong order book. wal-mart shares found some buyers, rising almost 3% after its big sell-off on monday after allegations of bribery surfaced at its mexican unit. the mexico attorney general opened a preliminary investigation into the claims. earlier, susie reported on the airline sector. one area we didn't see come along with today's rally was the transportation sector. among the issues weighing on the sector was shipping giant u.p.s. it delivered first quarter earnings that came in one penny shy of estimates.
it's u.s. shipping business benefited from internet shopping sites like amazon, but that's relatively low-margin business for u.p.s. shares fell almost 2%, down to their lowest price in more than a month. the transportation sector, measured by this exchange traded fund, fell almost 2%. while the broad market is at a three-week high, this transportation fund is at its lowest price since mid-march. transportation stocks are looked at by some as a leading indicator. and that's tonight's "market focus." >> susie: it has always been hard for artists to fund their ideas. some lucky ones may get a grant from the national endowment for the arts. but what if we told you there's a web site that will likely out-
fund that government agency this year? it's called kickstarter and, as erika miller explains, it's supporting some mind-blowing ideas. >> reporter: i'm standing at the base of the williamsburg bridge on the lower east side. wait till you hear what a group of urban designers want to build underground. a park. yes, a park! in an abandoned trolley terminal. it would be called the lowline, and look like this. notice the trees? they may be underground, but they will be real. >> this technology does something somewhat simple, which is it harvests sunlight above ground. it reflects it using fiber optics, and distributes it below ground at an intensity that we believe is strong enough to support photosynthesis. >> reporter: to raise money for a full-scale demonstration of the lowline, developers turned to a web site called kickstarter. it helps solicit funds for creative projects using videos and project descriptions. >> we have 13 categories on
kickstarter of kinds of projects, so it's art, comic books, publishing, film, music, design, technology, all kinds of things. >> reporter: there's no minimum pledge, and since the site launched in 2009, nearly two million supporters have raised $200 million for 20,000 projects. but people don't just give out of the goodness of their hearts. >> pledges are not donations, because people are getting things in return. if i give you $10, i get something worth $10 back. and you decide what that is. >> reporter: at kickstarter's headquarters, you can see some of the more interesting examples of rewards, like a laser-cut skull; organic lemon and sea salt popcorn; a toy catapult; and a loomi light fixture. unlike other crowd-funding sites, kickstarter is an all-or- nothing proposition. no money changes hands unless a project is fully funded by its deadline. when that happens, kickstarter takes a 5% fee. the lowline was able to surpass
its fundraising goals, raising $155,000. but money was only part of appeal of kickstarter. >> having kickstarter as one of the first few things that we did was a strategic decision to help show that the community is behind us. when you have a lot of people giving you a $1 or $5 or $10, it shows that people are willing to do whatever they can. >> reporter: if the lowline project is successful, it could become a model for other parks around the nation. in manhattan alone, there are 13 acres of unused underground space that could be used in a similar way. erika miller, "nightly business report," lower east side. >> tom: a quick note about our story on fundly last night. we misreported the amount of money the web site has raised. since launching in 2009, it has raised $240 million. tomorrow on nbr, our week-long look at crowd-sourcing continues. can it actually change the way businesses are run? we'll speak with jeff howe,
author of "crowd-sourcing." plus, we catch up with ford c.e.o. alan mulally and ask how much europe is hurting its profits. and we're a couple of weeks into earnings season, and so far, the results have not been as bad as expected. >> susie: when it comes to teaching your kids about money, you don't have to have a ph.d. in economics and a financial planning degree. alisa weinstein explains. she's author of "earn it, learn it," which was just named children's book of the year by the institute for financial literacy. >> i don't like to cook, i like to eat. but i don't like to cook. my daughter, however, loves to cook. so every so often, we'll cook. she doesn't care that i'm no expert chef. what she loves is to watch me follow a recipe and give it a go. teaching about money's the same thing. parents don't have to be financial experts. we don't have to spend weeks prepping in the library, attending all these seminars, making up all these crazy charts. we just need to give it a go.
you know enough to get the ball rolling, even with a financial blunder or two, or 12, under your belt. start with the basics. "here's a dollar-- spend it. save it. spend it, then wish you saved it." and as your child advances, so will you. when he starts asking questions you don't know the answer to, it's okay to admit it. talk about what you wish you knew at his age. then, look it up together. find a financial expert who speaks to both of you, whose philosophy and program fits your values and family style. there's your lesson-- just like i don't have to be an expert to teach my kid how to cook, you don't have to be a financial expert to teach your kid about money. you just have to be an expert in loving your kid. i'm alisa weinstein. >> tom: that's "nightly business report" for thursday, april 26. i'm tom hudson. good night, everyone, and good night to you, too, susie. >> susie: good night, tom. i'm susie gharib. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: